SIAM Cement Group (SCG) is sticking with an estimate of revenue expansion of up to 6 per cent for this year, despite a sluggish first quarter when the industrial giant booked just 2 per cent growth from the year-earlier period, president and chief executive officer Roongrote Rangsiyopash said yesterday.
“Our total revenue in the first quarter of this year grew at a slower pace than our estimate, due to the baht strengthening from an average of 35 to the US dollar last year to 31.6 in the first quarter of this year. This impacted both our sales and net profit by about 10 per cent,” Roongrote said at a press conference.
In the first quarter of this year, the company reported total revenue of Bt118.25 billion, for the 2 per cent rise from the same period of last year. Up to 40 per cent of the total revenue came from exports, with the rest from the domestic market. Net profit of Bt12.4 billion marked a drop of 29 per cent from the same quarter of last year.
With the stronger baht, Roongrote said that the group has had to revise its business strategy, including more reliance on innovation to improve its products and the greater use of digital technology to spur innovation and integrate its businesses for the benefit of its customers in both the domestic and overseas markets. To this end, the group is spending an investment budget about 1 per cent of its total revenue - or about Bt4 billion - for research and development with the aim of offering more innovative products and services.
The company also has tried to reduce costs in management and raw materials to boost net profit for the rest of this year, Roongrote said.
“This will help the group to increase our prices for products and services. As a result, we have continued to maintain our target growth at up to 6 per cent for this year compared with last year,” he said.
On the expenditure front, the group is maintaining its investment budget for this year at Bt60 billion, of which Bt20 billion will be put into its petroleum complex in Vietnam. Construction is scheduled to start in the second half of this year. The project has a total investment budget of Bt180 billion.
The remaining Bt40 billion will be invested in the domestic market and in Asean countries - such as Myanmar, Indonesia, Cambodia, and Laos - with a focus on direct investment by the company or via merger and acquisition opportunities in construction raw materials and in packaging, said the group’s vice president-finance and investment and chief finance officer, Chaovalit Ekabut.
In the year’s first quarter, the company spent Bt9 billion of a total investment budget of Bt60 billion in its construction raw materials and packaging businesses, Chaovalit said.
Up to 39 per cent of its total revenue in the quarter - or Bt45.84 billion - came from high-value-added products and services. The company expects this proportion will reach 50 per cent this year, Chaovalit said.
Roongrote said he was encouraged by the signs of a recovery in the construction raw materials sector, especially for cement, as the government gears up to starts to its planned investments to develop the country’s infrastructure. This spending will drive demand for cement. When the government’s investment in these infrastructure projects kicks off, he said, this would boost demand from the private sector to develop residential projects and this effect would become more evident in the next six to seven months.
Meanwhile, the outlook for packaging was improving with more demand for consumer products in both the domestic market and in border trade.
This increased demand saw the construction raw materials and packaging businesses grow 4 per cent and 11 per cent, respectively, in the first quarter.
The company’s petrochemical business, burdened by the high cost of raw materials and the strong baht, suffered a drop of 3 per cent for sales in the opening quarter from the same period last year, Roongrote said.